First home buyer boost comes with a catch

The new round of first home owner incentives, introduced by state governments in the past six months and targeted at new construction, is starting to have an impact.

NSW, Queensland, South Australia and Tasmania have all made increased offers to first home buyers but, in a move to help the construction industry, the benefits apply only to new homes, off-the-plan apartments and new building.

A NSW Treasury spokeswoman said the number of new homes being built or bought by first home buyers since the grant was introduced in October was four times greater than the same period last year.

In Queensland, developer QM Properties reported its strongest month in sales in 3½ years last October, with about 55 per cent made to first home buyers.

QM properties sales manager Damien Ross said the grant spiked sales in Forest Pines and Coomera Retreat, Central Lakes and The Village at Durack, which appealed to young first home buyers because of their affordability.

First home buyers usually have less equity and savings and therefore buy established dwellings because they are more affordable.

“Over all of our developments in south-east Queensland, sales have doubled as a direct result of the new grant," QM properties sales manager Damien Ross said.

Stockland
also noted a moderate improvement in sales in NSW and Queensland because of the grants.

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The chief executive of
AVJennings
, Peter Summers, said the new incentives looked to be having some positive impact.

But he warned that the handouts, like the cut in interest rates, were not having an immediate impact as in the past.

“Stimulus programs still lag behind the major issues of consumer confidence and employment," Mr Summers said.

Stockland’s general manager of residential in Victoria and NSW, Andrew Whitson, said the Victorian market had been subdued since the $13,000 bonus for first new home buyers was cut last July.

And that is the catch. Increased benefits are great while they last, but they tend to drag forward demand and end in a hangover when the incentive is, inevitably, withdrawn.

The latest figures on housing finance, from the Australian Bureau of Statistics for October, show little evidence of increased first home buyer activity. In fact, the proportion of first home buyers gaining finance fell to 18.7 per cent.

But the new incentives had only just come in and other incentives, in Victoria and for buyers of second-hand homes in NSW and Queensland, had been withdrawn.

BIS Shrapnel associate director Kim Hawtrey said the increased first home buying reported by NSW Treasury reflected a clear positive shift by buyers towards new dwellings because of the grants.

“It will have a positive effect on construction of new homes, which will help to support building levels, especially in NSW where it has been performing badly," he said.

The executive director of the Property Council in Queensland, Kathy MacDermott, said the new incentive in Queensland was providing a much-needed boost to construction and residential sectors under pressure because of lower household consumption and investment in dwellings and slowing employment growth.